BUSI 2150U Chapter Notes - Chapter 4: Book Value, Accrual, Financial Statement
Document Summary
Income measurement and the objectives of financial reporting. To recognize revenue in a logical and rational manner we need criteria to guide the choice. When this critical event occurs 100 percent of the revenue is recognized: under the gradual approach revenue is recognized gradually over a period of time. The gradual approach, often used by entities providing services or for long- term contracts, provides useful and timely information to stakeholders about long- term contracts. Even though the financial statements are affected by using different revenue and expense recognition methods, the underlying economic activity of the entity is the same regardless of the methods chosen. Sometimes a single transaction provides more than one good and/or service to customers. In these multi-deliverable arrangements the amount of revenue should be split among each of the components purchased based on the fair value of the components.